Australia’s Reserve Bank hits out at Libra

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Reserve Bank of Australia claims that stablecoins shouldn’t be introduced until more legal safeguards are put in place

Comments were made during a written report to Senate Select Committee on Financial Technology and Regulatory Technology

"It is unclear that there will be strong demand for global stablecoins even if they do meet all regulatory requirements, particularly for domestic payments”, says RBA in a scathing report

One of the world’s major central banks has hit out at Facebook’s proposed cryptocurrency Libra.

The Reserve Bank of Australia made the negative remarks in a submission which it was preparing for the Senate Select Committee on Financial Technology and Regulatory Technology.

It emphasised claims from the Group of 7 (G7) countries that Libra has “significant legal and regulatory risks” – and also asked whether or not there would be demand for the service in Australia.

The remarks are a new blow to Libra, which has not had a very successful start.

The proposed cryptocurrency once had the support of major corporations around the world including Visa and PayPal.

Now, however, many of the big names behind it have pulled out – leaving it in limbo, and with an uncertain future ahead of it.

It was originally proposed as a sort of stablecoin, which would mean it would be backed by a real-life asset such as a basket of fiat currency-supported assets.

However, the Reserve Bank of Australia is clearly not convinced by Facebook’s argument – and has warned against Libra and stablecoins more generally in a very public manner.

“In October, the G7 released a report on global stablecoins in which it recognised that they have the potential to be more efficient and inclusive than existing payment methods, particularly for cross-border payments”, it wrote in its written submission.

“However, the G7 also noted that such proposals raise significant legal and regulatory risks, including to consumer/investor protection, data privacy, monetary policy and financial stability.”

In its submission, it endorsed the perspective of the G7 that stablecoin launches ought to be banned until the risks had been adequately assessed.

“Accordingly, it cautioned that private sector global stablecoin initiatives should not be permitted to launch until all risks and regulatory requirements have been addressed. The bank is supportive of this view”, it said.

It also delved into the issue of whether or not there was sufficient demand in place for the coin.

“In Australia, it is unclear that there will be strong demand for global stablecoins even if they do meet all regulatory requirements, particularly for domestic payments”, it said.

“Australia is already well served by a range of low-cost and efficient real-time payment methods, such as the NPP, that utilise funds held in accounts at prudentially supervised financial institutions”, it added.

Are you interested in hearing more about how crypto, blockchain and other technologies could influence the remittances market? If so, check out our news pages here.

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